11 July 2008

Insurance Conference Debates on Industry Fraud

Insurance fraud on the rise
Insurance fraud on the rise
Policy costs will have to increase to cover the significant rise in fraudulent claims.

July 11 - One of the most pressing problems in the South African insurance industry at present is the issue of insurance fraud. This matter was discussed at length by participants in the annual Insurance Institute of South Africa conference that was held at Sun City in June.

Industry analysts and experts heard how desperate consumers are trying to make 'easy money' in today's tough economy by submitting false claims about their insurances.

The Managing Director of Alexander Forbes Insurance, Gari Dombo said that there has been a significant rise in claims against car theft and hijackings and he believes many of these claims have been inflated or falsified, although it was difficult to pinpoint just how many of these constituted insurance fraud.

"The challenge is that as interest rates are increasing, people are starting to treat their insurance policies as savings accounts," explained Dombo.

These sentiments were also echoed by the Managing Director of Standard Bank Insurance Brokers, Cliff Brooke who said his company had also noticed a sharp increase in consumers inflating the value of their insurance claims. Other consumers have lied about being hijacked or about goods stolen by criminals.

Brookes has put a tentative number of 1:4 in the ratio of false claims against genuine insurance claims, although he stressed that these numbers are not quantifiable.

This trend, according to Brookes, leaves insurance companies with no choice but to increase the costs of their policies in order to cover all the claims - false or otherwise.

Fraud insurance is not only exclusive to the short term insurance industry, according to deputy ombudsman at the Office of the Ombudsman for Short Term insurance. Hendrik Viljoen said that underwriters across the industry are rejecting a large number of claims - a phenomenon that might not have occurred had the economic climate been different.

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Story Highlights »
  • Pressing problem of insurance fraud discussed at the annual Insurance Institute of South Africa conference in June
  • Rise in inflated or falsified claims against car theft and hijackings

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